Wireless communications are increasing in all market sectors in spite of the government’s clumsy management of the broadcast spectrum. But maximizing wireless growth and innovation requires the establishment of a spectrum market.
Since the 1920s, the federal government has managed the broadcast spectrum as a scarce public resource. Spectrum licenses were awarded only sparingly by the Federal Communications Commission, which overlooked the economic benefits of more liberal allocation.
The decade-long delay in licensing spectrum for cellular telephony, for example, is estimated to have cost at least $86 billion in lost consumer welfare. In 1994, the commission forecast 54 million mobile telephone subscribers by 2000, but the number actually reached 110 million by 2000.
Policymakers have made only halting progress toward a spectrum market. Congress in 1993 authorized the FCC to award wireless licenses by auction. The principal benefit of spectrum auctions is not to raise yet more money for the federal government, but to more quickly put available spectrum to commercial use.
Unfortunately, the government’s seemingly insatiable appetite for funds has slowed progress in spectrum allocation. Not until last year did the FCC finally issue rules on spectrum leasing to allow a secondary market to emerge. Leasing increases efficient use of the spectrum by providing lower-cost access to unused capacity.
Government agencies enjoy preferential use of some spectrum. Much of this bounty is not used efficiently. The FAA, for example, still uses wasteful analog technology, which requires more spectrum than digital transmission. But some reform is underway. In July 2002, the Department of Commerce released a plan in concert with the FCC and the Department of Defense to make more spectrum available for wireless services. In February 2003, the Department of Commerce agreed to release some of its spectrum allocation for wireless data communications. Finally, the FCC and the Department of Commerce approved the use of ultra-wideband (UWB) technology that enables broadband connections and assists in the performance of critical safety services.
Another casualty of the government’s poor spectrum management is the inability of various public safety agencies to communicate directly with each other. Spectrum is allocated in widely dispersed “chunks” to different agencies. And because no single radio can access all the various public safety channels, agencies are unable to communicate collectively via radio.